Funding a Metro through land development
Detailed description of the Good Practice
Ørestad is an area approximately 5 km south of the city centre of Copenhagen (København) on the island of Amager. Despite being relatively close to downtown Copenhagen and Copenhagen Airport (Kastrup), it was relatively undeveloped until the 1990s. A major reason was that much of the land had been reserved and used for military training purposes.
The light rail system originally foreseen was replaced by an automated Metro. It was believed that a Metro would be cheaper to operate and attract more passengers. However, construction of the Metro was much more complicated than expected with very serious cost overruns. Passenger numbers have been lower than forecast. The consortium has no authority to set fares; these are set by MOVIA, the transport authority for Eastern Denmark. Revenue distribution has been controversial; disputes have several times been settled by the Ministry of Transport.
Land has been sold more easily and at much higher prices than foreseen (at least until autumn 2008). Borrowing has been possible at lower interest rates than foreseen. After teething problems, the Metro works very well with better than 98% punctuality and carried 46 million passengers in 2008.
Passenger forecasts have been revised several times, but are, in any case, much lower than the original forecasts when the metro was decided. There are several bus routes parallel or almost parallel to the metro. These may be slower but as the bus network is denser than the Metro’s, the total journey times may be equal. Copenhagen city centre is very densely built with scarce and expensive parking. This is a disadvantage for car travel and perhaps an advantage for public transport.
quality of life
Objectives of the Good Practice
To develop this land, the Ørestad consortium (Ørestadsselskabet
I/S) was set up 1992 with two main tasks:
- develop and sell the land for housing, offices, schools, etc.; and
- finance the building and operation of the Metro through the sale of land.
Participants of the Good Practice
the Ørestad consortium
Target group of the Good Practice
More Details of the Good Practice
The consortium was owned by the City of Copenhagen (55%) and the Danish State (45%). This 55/45 division resembled the previous division of land ownership between the city and state. The consortium was then not a publicprivate partnership (PPP) in the original sense. In 2007 the
Ørestad consortium was replaced by the Metro consortium with a similar division of ownership.
The first stage of Metro began operating in 2007. The Metro’s construction was financed through the sale of land. The consortium was free to borrow on the markets, and the loans were fully guaranteed by the City of Copenhagen and the Danish State.
Data sources and references
European Local Transport Information Center
http://www.eltis.org/study_sheet.phtml?study_id=2200&lang1=en (Accessed December 30, 2009)